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A PROJECT REPORTONMARGINAL COSTING OF LARSEN & TOUBRO

In the subject Cost Accounting

SUBMITTED TOUNIVERSITY OF MUMBAIFOR SEMESTER 2 OF M.COM.BYName of the student(WALKE SHAMEE ARUN)(Roll No. 79)

UNDER THE GUIDANCE OFProf. Ashwina PaulYEAR 2013 2014

ACKNOWLEDGEMENT

At the beginning, I would like to thank GOD for his shower of blessing. The desire of completing this project was given by my guide Prof. Ashwina Paul. I am very much thankful to him for the guidance, support and for sparing his precious time from a busy schedule.I would fail in my duty if I dont thank my parents who are pillars of my life. Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

(Signature of the student)

DECLARATION BY THE STUDENT

I, Walke Shamee Arun student of M.Com. Part-1 Accountancy, Roll No. 79 hereby declare that the project for the Paper Cost Accounting titled, Marginal Costing of Larsen & Toubro submitted by me to University of Mumbai, Semester 2 examination during the academic year 2013-2014, is based on actual work carried by me under the guidance and supervision of prof. Ashwini Paul Madam.I further state that this work is original and not submitted anywhere else for any examination.

Signature of student

CERTIFICATE

This is to certify that the project entitled Marginal Costing of Larsen & Toubro submitted by Ms.Walke Shamee Arun Roll No. 79 student of M.Com. (Part-1) Management (University of Mumbai) Semester 2 examination has not been submitted for any other examination and does not form a part of any other course undergone by the candidate. It is further certified that she has completed all required phases of the project. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Internal Examiner External Examiner

Co-coordinator Principal

College seal

INDEXSR.NOParticularsPage No

1

I) Cover page with details II) Declaration of the student III) Certificate from the institutionIV) Acknowledgement

2IntroductionA) Objective of the studyB) Scope of the studyC) Research DesignD) Limitation of the study

3Company Profile: Larsen & Toubro

4Findings, suggestions & conclusion

CHAPTER 1INTRODUCTIONMarginal costing - definitionMarginal costing is formally defined as: The accounting system in which variable costs are charged to cost units and the fixed costs of the period are written-off in fullagainst the aggregate contribution. Its special value is in decision making. Marginal costing distinguishes between fixedcosts and variable costsas conventionally classified. Variable costing is another name ofmarginal costing. Marginal costing may be defined asthe technique of presenting costdata where invariable costs and fixedcosts are shown separately formanagerial decision-making. It should be clearly understood that marginal costing is not a method of costing likeprocess costingor job costing. Rather itis simplya method ortechnique ofthe analysis of cost information for the guidance of management which tries to find out an effect onprofit due to changes in thevolume of output.

MARGINAL COSTThe marginal cost of a product is itsvariable cost. This is normally taken to be; direct labor, direct material, direct expenses and thevariable part ofoverheads. Marginal cost means the cost of the marginal or last unit produced. It isalso defined as the cost of one more orone less unit produced besides existing level of production The marginal cost varies directly with thevolume of production and marginal cost perunit remains the same. It consists of prime cost, i.e. cost of directmaterials, directlabour and all variable overheads. It does not contain any element of fixedcost which is kept separate under marginal cost technique. The term contribution mentioned in the formal definition is the term given to the difference between Salesand Marginal cost. Thus MARGINAL COST =VARIABLE COST DIRECT LABOUR+ DIRECT MATERIAL+ DIRECT EXPENSE+ VARIABLE OVERHEADS Marginal costing technique has given birth to a very useful concept of contribution where contribution is given by:Sales revenue less variable cost (marginal cost)Contribution may be defined as the profit before the recovery of fixed costs. Thus, contribution goes toward the recovery of fixed cost and profit, and is equalto fixed costplus profit (C= F + P).In case afirm neither makes profitnor suffers loss, contribution will be just equal to fixed cost (C = F). This is known as breakeven point.The concept of contribution is very useful in marginal costing. It has afixed relation with sales. Theproportion of contribution to sales is known as P/Vratio which remains the same undergiven conditions of production andsales.

Theory of Marginal CostingThe theory of marginal costing as set out in A report on Marginal Costing publishedby CIMA, London isas follows: In relation to a given volume of output, additional output can normally be obtained artless than proportionate cost because within limits, the aggregate of certain items of cost will tend to remain fixed and only the aggregate ofthe remainder will tend to riseproportionately with an increase in output.Conversely, a decrease inthe volume ofoutput will normally be accompanied by lessthan proportionate fall in theaggregate cost.The theory of marginal costing may, therefore, by understood in the following two steps:1. If the volume of output increases, the cost per unit in normal circumstances reduces. Conversely, if anoutput reduces, the cost per unit increases. If a factory produces 1000units at a totalcost of $3,000 and if byincreasing the output by one unit the cost goes up to $3,002, the marginal cost of additional output will be $.2.2. If an increase inoutput is more than one, the total increase incost divided by the total increase in output will give the average marginal cost per unit. If, for example,the output is increased to 1020 units from 1000 units andthe total cost to produce these units is $1,045, the average marginal cost per unit is$2.25. It can be described as follows: Additionalcost= $45 =$2.25Additional units 20The principles of marginal costing are asfollows: a. For any given period of time, fixed costs will bethe same, for any volume of sales and production (provided that the level of activity is within the relevant range).Therefore, by selling an extra item of product or service the following will happen:Revenue will increase by the sales value of the item sold.Costs will increase by the variable cost per unit.Profit will increase by theamount of contribution earned from the extraitem.b. Similarly, if the volume of sales falls by oneitem, the profit will fall by the amount of contribution earned from theitems. Profit measurement should therefore be based onan analysis of totalcontribution. Since fixed costs relate to a period of time, and do not change with increases ordecreases in sales volume, it is misleading to charge units of sale witha share of fixedcosts.d. When a unit ofproduct is made, the extra costs incurred in its manufacture are the variable production costs. Fixed costs are unaffected, and no extra fixed costs are incurred when output is increased.

Ineconomicsandfinance,marginal costis the change in thetotal costthat arises when the quantity produced has an increment by unit. That is, it is the cost of producing one more unit of a good.In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit. For example, if producing additional vehicles requires building a new factory, the marginal cost of theextravehicles includes the cost of the new factory. In practice, this analysis is segregated into short and long-run cases, so that over the longest run, all costs become marginal. At each level of production and time period being considered, marginal costs include all costs that vary with the level of production, whereas other costs that do not vary with production are considered fixed.If the good being produced is infinitely divisible, so the size of a marginal cost will change with volume, as a non-linear and non-proportional cost function includes the following:variable terms dependent to volume, constant terms independent to volume and occurring with the respective lot size, jump fix cost increase or decrease dependent to steps of volume increase.In practice the above definition of marginal cost as the change in total cost as a result of an increase in output of one unit is inconsistent with the differential definition of marginal cost for virtually all non-linear functions. This is as the definition finds the tangent to the total cost curve at the point q which assumes that costs increase at the same rate as they were at q. A new definition may be useful for marginal unit cost (MUC) using the current definition of the change in total cost as a result of an increase of one unit of output defined as: TC(q+1)-TC(q) and re-defining marginal cost to be the change in total as a result of an infinitesimally small increase in q which is consistent with its use in economic literature and can be calculated differentially.If the cost function is differentiable joining, the marginal cost is the cost of the next unit produced referring to the basic volume.

If the cost function is not differentiable, the marginal cost can be expressed as follows.

A number of other factors can affect marginal cost and its applicability to real world problems. Some of these may be considered market failures. These may includeinformation asymmetries, the presence of negative or positiveexternalities,transaction costs,price discriminationand others.

Cost functions and relationship to average costIn the simplest case, the total cost function and its derivative are expressed as follows, where Q represents the production quantity, VC represents variable costs, FC represents fixed costs and TC represents total costs.

Since (by definition) fixed costs do not vary with production quantity, it drops out of the equation when it is differentiated. The important conclusion is that marginal costis not related tofixed costs. This can be compared withaverage total costor ATC, which is the total cost divided by the number of units produced anddoes include fixed costs.

For discrete calculation without calculus, marginal cost equals the change in total (or variable) cost that comes with each additional unit produced. In contrast, incremental costis the composition of total cost from the surrogate of contributions, where any increment is determined by the contribution of the cost factors, not necessarily by single units.For instance, suppose the total cost of making 1 shoe is $30 and the total cost of making 2 shoes is $40. The marginal cost of producing the second shoe is $40 $30 = $10.Marginal cost is not the cost of producing the "next" or "last" unit.[2]As Silberberg and Seen note, the cost of the last unit is the same as the cost of the first unit and every other unit. In the short run, increasing production requires using more of the variable input conventionally assumed to be labor. Adding more labor to a fixed capital stock reduces the marginal product of labor because of thediminishing marginal returns. This reduction in productivity is not limited to the additional labor needed to produce the marginal unit - the productivity of every unit of labor is reduced. Thus the costs of producing the marginal unit of output has two components: the cost associated with producing the marginal unit and the increase in average costs for all units produced due to the damage to the entire productive process (AC/q)q. The first component is the per unit or average cost. The second unit is the small increase in costs due to the law of diminishing marginal returns which increases the costs of all units of sold.Therefore, the precise formula is: MC = AC + (AC/q)q.Marginal costs can also be expressed as the cost per unit of labor divided by the marginal product of labor.

Becauseis the change in quantity of labor that affects a one unit change in output, this implies that this equals. Therefore[4]Since the wage rate is assumed constant, marginal cost and marginal product of labor have an inverse relationshipif marginal cost is increasing (decreasing) the marginal product of labor is decreasing (increasing). Economies of scaleEconomies of scale is a concept that applies to the long run, a span of time in which all inputs can be varied by the firm so that there are no fixed inputs or fixed costs. Production may be subject toeconomies of scale(ordiseconomies of scale). Economies of scale are said to exist if an additional unit of output can be produced for less than the average of all previous units that is, if long-run marginal cost is below long-run average cost, so the latter is falling. Conversely, there may be levels of production where marginal cost is higher than average cost, and average cost is an increasing function of output. For this generic case, minimum average cost occurs at the point where average cost and marginal cost are equal (when plotted, the marginal cost curve intersects the average cost curve from below); this point willnotbe at the minimum for marginal cost if fixed costs are greater than 0.Perfectly competitive supply curveThe portion of the marginal cost curve above its intersection with the average variable cost curve is the supply curve for a firm operating in aperfectly competitive market. (the portion of the MC curve below its intersection with the AVC curve is not part of the supply curve because a firm would not operate at price below the shut down point) This is not true for firms operating in other market structures. For example, while a monopoly "has" an MC curve it does not have a supply curve. In a perfectly competitive market, a supply curve shows the quantity a seller's willing and able to supply at each price - for each price there is a unique quantity that would be supplied. The one-to-one relationship simply is absent in the case of a monopoly. With a monopoly there could be an infinite number of prices associated with a given quantity. It all depends on the shape and position of the demand curve and its accompanying marginal revenue curve.Decisions taken based on marginal costsIn perfectly competitive markets, firms decide the quantity to be produced based on marginal costs and sale price. If the sale price is higher than the marginal cost, then they supply the unit and sell it. If the marginal cost is higher than the price, it would not be profitable to produce it. So the production will be carried out until the marginal cost is equal to the sale price. In other words, firms refuse to sell if the marginal cost is higher than the market price. Relationship to fixed costsMarginal costs are not affected by changes in fixed cost. Marginal costs can be expressed as C(q)Q. Since fixed costs do not vary with (depend on) changes in quantity, MC is VCQ. Thus if fixed cost were to double MC would not be affected and consequently the profit maximizing quantity and price would not change. This can be illustrated by graphing the short run total cost curve and the short run variable cost curve. The shape of the curves are identical. Each curve initially decreases at a decreasing rate, reaches an inflection point, then increases at an increasing rate. The only difference between the curves is that the SRVC curve begins from the origin while the SRTC curve originates on the y-axis. The distance of the origin of the SRTC above the origin represents the fixed cost - the vertical distance between the curves. This distance remains constant as the quantity produced, Q, increases. MC is the slope of the SRVC curve. A change in fixed cost would be reflected by a change in the vertical distance between the SRTC and SRVC curve. Any such change would have no effect on the shape of the SRVC curve and therefore its slope at any point - MC.ExternalitiesExternalities are costs (or benefits) that are not borne by the parties to the economictransaction. A producer may, for example,pollutethe environment, and others may bear those costs. A consumer may consume a good which produces benefits for society, such as education; because the individual does not receive all of the benefits, he may consume less than efficiency would suggest. Alternatively, an individual may be a smoker or alcoholic and impose costs on others. In these cases, production or consumption of the good in question may differ from the optimum level.

Negative externalities of production

Negative Externalities of ProductionMuch of the time, private and social costs do not diverge from one another, but at times social costs may be either greater or less than private costs. When marginal social costs of production are greater than that of the private cost function, we see the occurrence of anegative externalityof production. Productive processes that result inpollutionare a textbook example of production that creates negative externalities.Such externalities are a result of firms externalizing their costs onto a third party in order to reduce their own total cost. As a result of externalizing such costs we see that members of society will be negatively affected by such behavior of the firm. In this case, we see that an increased cost of production on society creates a social cost curve that depicts a greater cost than the private cost curve.In an equilibrium state we see that markets creating negative externalities of production will overproduce that good. As a result, the socially optimal production level would be lower than that observed.Positive externalities of production

Positive Externalities of ProductionWhen marginal social costs of production are less than that of the private cost function, we see the occurrence of apositive externalityof production. Production ofpublic goodsare a textbook example of production that create positive externalities. An example of such a public good, which creates a divergence in social and private costs, includes the production of education. It is often seen that education is a positive for any whole society, as well as a positive for those directly involved in the market.Examining the relevant diagram we see that such production creates a social cost curve that is less than that of the private curve. In an equilibrium state we see that markets creating positive externalities of production will under produce that good. As a result, the socially optimal production level would be greater than that observed.Social costsOf great importance in the theory of marginal cost is the distinction between the marginalprivateandsocialcosts. The marginal private cost shows the cost associated to the firm in question. It is the marginal private cost that is used by business decision makers in their profit maximization goals. Marginal social cost is similar to private cost in that it includes the cost of private enterprise butalsoany other cost (or offsetting benefit) to society to parties having no direct association with purchase or sale of the product. It incorporates all negative and positiveexternalities, of both production and consumption. Examples might include a social cost from air pollution affecting third parties or a social benefit from flu shots protecting others from infection.

The main features of marginal costing areas follows:1. Cost ClassificationThe marginal costing technique makes a sharp distinction between variable costs and fixed costs. It is thevariable cost on the basis of which production and sales policies are designed by afirm following the marginal costing technique.2. Stock/Inventory Valuation Under marginal costing, inventory/stock forprofit measurement isvalued at marginal cost. It is insharp contrast to the total unit cost underabsorption costing method.3. MarginalContribution Marginal costing technique makes use of marginal contribution for marking various decisions. Marginal contribution is the difference between sales andmarginal cost. It forms the basis forjudging the profitability of different products ordepartments.

Advantages and Disadvantages ofMarginal Costing TechniqueAdvantages:1. Marginal costing is simple tounderstand.2. By not charging fixed overhead to cost ofproduction, the effect of varying chargesper unit is avoided.3. It prevents the illogical carry forward in stock valuation of some proportion ofcurrent years fixed overhead.4. The effects of alternative sales or production policies can be more readily available and assessed, and decisions takenwould yield the maximum return to business.5. Iteliminates largebalances left in overhead control accountswhich indicate the difficulty of ascertaining an accurate overhead recovery rate.6. Practical cost control isgreatly facilitated. By avoiding arbitrary allocation of fixed overhead, efforts can beconcentrated onmaintaining a uniform and consistent marginal cost. It is useful tovarious levels of management.7. It helps inshort-term profit planning by breakeven and profitability analysis, both inters of quantityand graphs. Comparative profitability andperformance between two or more products and divisions can easily be assessed and brought tothe notice ofmanagementfor decisionmaking.Disadvantages:1. The separation of costs into fixed and variable is difficultand sometimes gives misleading results2. Normal costing systems also apply overhead undernormal operating volume and this shows that no advantage is gained by marginal costing.3. Under marginal costing, stocks and workin progress are understated. The exclusion of fixed costs from inventories affect profit, and true and fair view offinancial affairs ofan organization may not beclearly transparent.4. Volume variance in standard costing also discloses the effect of fluctuating output unfixed overhead. Marginal cost data becomes unrealistic incase of highly fluctuating levels of production, e.g., incase of seasonal factories.5. Application of fixed overhead depends on estimates and not on the actual andas such there may be under or over absorption of thesame.6. Control affected by means of budgetary control is also accepted by many. In order to know the net profit, we should not be satisfied with contribution and hence, fixed overhead is also a valuable item. A system which ignores fixed costs is less effective since a major portion of fixed cost isnot taken care of under marginal costing.7. In practice, sales price, fixed cost and variable cost per unit may vary. Thus, the assumptions underlying the theoryof marginal costing sometimes becomes unrealistic. For long term profitplanning, absorption costing is the only answer.

OBJECTIVE OF THE STUDY1. To study about Marginal Costing

2. To study and analyze Financial statements of Larsen & Toubro

SCOPE OF THE STUDY1. It covers the information about Marginal Costing1. It covers the information about Financial Statements of Larsen & Toubro

RESEARCH DESIGN For the purpose of the present study only secondary data were used. Secondary data are collected from books and websites

LIMITATIONS OF THE STUDY During the study there was lack of information available for the study. No proper source on the topic

CHAPTER SCHEMEChapter 1- Introduction Gives an introduction to the study

Chapter 2- Conceptual framework & Observation Gives the information about profile, financial statement, marginal cost statement of the company.

Chapter 3- Conclusion Deals with findings, suggestions and conclusion to the topic

CHAPTER2COMPANY PROFILE:Date of Establishment- 1946Revenue- 9933.88 (USD in Millions )Market Cap- 785064.76857305 (Rs. in Millions)Corporate Address- L & T House, Ballard Estate,Mumbai-400001,Maharashtra www.larsentoubro.com Management Details: Chairperson A.M.Naik MD A.M.Naik Directors A.K.Jain, A.M.Naik, A.K.Jain, AM Naik,Bhagyam Ramani, J P Nayak, J S Bindra, K VRangaswami, K Vekataramanan, K Venkataramanan, MM Chitale, M V Kotwal, MM Chitale, N Hariharan, NMohan Raj, R N Mukhija, R Shankar Raman, Ravi Uppal,S N Subrahmanyan, S N Talwar, S Rajgopal, SubodhBhargava, Thomas Mathew T, V K Magapu, Y MDeosthaleeBusiness Operation- Engineering ConstructionBackground- Larsen & Toubro (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. Larsen & Toubro Limited is the biggest legacy of two Danish Engineers, who built a world-class organization that is professionally managed and a leader in India's engineering and construction industry. It was the business.Financials Total Income- Rs. 454455.4 Million (year ending Mar 2011)Net Profit- Rs. 38870.5 Million (year ending Mar 2011)Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector.

More than seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business.

L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow itsglobal footprint, with offices and manufacturing facilitiesin multiple countries.

The company's businesses are supported by a wide marketing and distribution network, and have established a reputation for strong customer support.

L&T believes that progress must be achieved in harmony with the environment. A commitment to community welfare and environmental protection are an integral part of the corporate vision.

In response to changing market dynamics, L&T has gone through a phased process of redefining its organisation model to facilitate growth through greater levels of empowerment. The new structure is built around multiple businesses that servethe needs of different industries.

The evolution of L&T into the country's largest engineering and construction organization is among the most remarkable success stories in Indian industry.

L&T was founded in Bombay (Mumbai) in1938by two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro. Both of them were strongly committed to developing India's engineering capabilities to meet the demands of industry.

Henning Holck-Larsen and Soren Kristian Toubro, school-mates in Denmark, would not have dreamt, as they were learning about India in history classes that they would, one day, create history in that land.

In1938, the two friends decided to forgo the comforts of working in Europe, and started their own operation in India. All they had was a dream. And the courage to dare.

Their first office in Mumbai (Bombay) was so small that only one of the partners could use the office at a time!

In the early years, they represented Danish manufacturers of dairy equipment for a modest retainer. But with the start of the Second World War in1939, imports were restricted, compelling them to start a small work-shop to undertake jobs and provide service facilities.

Germany's invasion of Denmark in1940stopped supplies of Danish products. This crisis forced the partners to stand on their own feet and innovate. They started manufacturing dairy equipment indigenously. These products proved to be a success, and L&T came to be recognised as a reliable fabricator with high standards.

The war-time need to repair and refit ships offered L&T an opportunity, and led to the formation of a new company, Hilda Ltd., to handle these operations. L&T also started two repair and fabrication shops - the Company had begun to expand.

Again, the sudden internment of German engineers (because of the War) who were to put up a soda ash plant for the Tatas, gave L&T a chance to enter the field of installation - an area where their capability became well respected.

THE JOURNEY

In1944, ECC was incorporated. Around then, L&T decided to build a portfolio of foreign collaborations. By1945, the Company represented British manufacturers of equipment used to manufacture products such as hydrogenated oils, biscuits, soaps and glass.

In1945, L&T signed an agreement with Caterpillar Tractor Company, USA, for marketing earthmoving equipment. At the end of the war, large numbers of war-surplus Caterpillar equipment were available at attractive prices, but the finances required were beyond the capacity of the partners. This prompted them to raise additional equity capital, and on 7th February1946, Larsen & Toubro Private Limited was born.

Independence and the subsequent demand for technology and expertise offered L&T the opportunity to consolidate and expand. Offices were set up in Kolkata (Calcutta), Chennai (Madras) and New Delhi. In1948, fifty-five acres of undeveloped marsh and jungle was acquired in Powai. Today, Powai stands as a tribute to the vision of the men who transformed this uninhabitable swamp into a manufacturing landmark.

PUBLIC LIMITED COMPANY

In December1950, L&T became a Public Company with a paid-up capital of Rs.2 million. The sales turnover in that year was Rs.10.9 million.

Prestigious orders executed by the Company during this period included the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant. With the successful completion of these jobs, L&T emerged as the largest erection contractor in the country.

In1956, a major part of the company's Bombay office moved to ICI House in Ballard Estate. A decade later this imposing grey-stone building was purchased by L&T, and renamed as L&T House - its Corporate Office.

The sixties saw a significant change at L&T - S. K. Toubro retired from active management in1962.

The sixties were also a decade of rapid growth for the company, and witnessed the formation of many new ventures: UTMAL (set up in1960), Audco India Limited (1961), Eutectic Welding Alloys (1962) and TENGL (1963).

EXPANDING HORIZONS

By1964, L&T had widened its capabilities to include some of the best technologies in the world. In the decade that followed, the company grew rapidly, and by1973had become one of the Top-25 Indian companies.

In1976, Holck-Larsen was awarded the Magsaysay Award for International Understanding in recognition of his contribution to India's industrial development. He retired as Chairman in1978.

In the decades that followed, the company grew into an engineering major under the guidance of leaders like N. M. Desai, S.R. Subramaniam, U. V. Rao, S. D. Kulkarni and A. M. Naik.

Today, L&T is one of India's biggest and best known industrial organisations with a reputation for technological excellence, high quality of products and services, and strong customer orientation. It is also taking steps to grow its international presence.

For an institution that has grown to legendary proportions, there cannot and must not be an 'end'. Unlike other stories, the L&T saga continues....

AWARDS & RECOGNITION2014

Major Awards & Recognition won by L&T in 2014L&T Bags Best Sustainability Report Award 2014L&Ts Sustainability Report Future Now was declared the best corporate report by the World CSR Congress for its width and depth of coverage, its high degree of transparency and the engaging manner in which it has projected non-financial data.The award was part of the Global Sustainability Leadership Awards 2014 instituted by the World CSR Congress. The selection process involved rigorous screening of applications from a number of corporates. Shortlisted contestants then made presentation to jury members comprising international CSR consultants, CEOs, sustainability experts and members of the media.The community initiatives of L&T Vizag unit also received an award in Outstanding Social Impact category.L&T Electrical & Automation's AU-Series WinsBest Product Award at ELECRAMA 2014The design and development capabilities of L&T's Electrical & Automation (E&A) earned rich recognition at ELECRAMA 2014 when its AU-Series of Final Distribution Products was declared winner of 'The Best Product developed by an Indian Exhibitor' Award. The award ceremony was held at The Exhibitors Nite - JOSH 2014 on January 11, 2014.

The AU-series of final distribution products comprises a complete range of protection, control and monitoring devices that include Miniature Circuit Breakers, Residual Current Devices, Isolators, Changeover switches, Energy meters, Time switches, Surge Protection Devices, Modular Contactors, Communication devices, and Distribution boards. It ensures the highest level of safety and convenience to the end users.

CHAPTER 3 FINANCIAL STATEMENTSStandalone Profit & Loss account------------------- in Rs. Cr. -------------------

Mar '13Mar '12Mar '11Mar '10Mar '09

12 mths12 mths12 mths12 mths12 mths

Income

Sales Turnover60,873.2653,170.5243,905.8737,187.5034,249.85

Excise Duty0.000.000.00317.31393.31

Net Sales60,873.2653,170.5243,905.8736,870.1933,856.54

Other Income2,104.961,393.281,480.372,321.671,612.58

Stock Adjustments1,132.03539.77532.64-422.99105.11

Total Income64,110.2555,103.5745,918.8838,768.8735,574.23

Expenditure

Raw Materials15,243.6214,133.9811,208.019,593.539,316.38

Power & Fuel Cost758.99638.79420.27334.08456.39

Employee Cost4,436.323,663.452,830.082,379.141,998.02

Other Manufacturing Expenses33,081.8226,787.1822,372.5316,913.3115,659.17

Selling and Admin Expenses0.000.000.001,854.231,844.83

Miscellaneous Expenses2,077.482,204.281,968.05325.58569.32

Preoperative Exp Capitalised0.000.000.00-36.25-24.48

Total Expenses55,598.2347,427.6838,798.9431,363.6229,819.63



Operating Profit6,407.066,282.615,639.575,083.584,142.02

PBDIT8,512.027,675.897,119.947,405.255,754.60

Interest982.40666.10619.25995.37770.00

PBDT7,529.627,009.796,500.696,409.884,984.60

Depreciation818.47699.46599.22383.65284.83

Other Written Off0.000.000.0030.9521.16

Profit Before Tax6,711.156,310.335,901.475,995.284,678.61

Extra-ordinary items0.000.000.00-45.13-21.09

PBT (Post Extra-ord Items)6,711.156,310.335,901.475,950.154,657.52

Tax1,800.501,853.831,943.581,577.021,176.19

Reported Net Profit4,910.654,456.503,957.894,375.523,481.66

Total Value Addition40,354.6133,293.7027,590.9321,770.0920,503.25

Preference Dividend0.000.000.000.000.00

Equity Dividend1,138.471,010.46882.84752.75614.97

Corporate Dividend Tax85.86101.44112.82110.25101.83

Per share data (annualised)

Shares in issue (lakhs)6,153.866,123.996,088.526,021.955,856.88

Earning Per Share (Rs)79.8072.7765.0172.6659.45

Equity Dividend (%)925.00825.00725.00625.00525.00

Book Value (Rs)473.57411.87358.81303.28212.32

Balance Sheet of Larsen and Toubro------------------- in Rs. Cr. -------------------



Sources Of Funds

Total Share Capital123.08122.48121.77120.44117.14

Equity Share Capital123.08122.48121.77120.44117.14

Share Application Money0.000.000.0025.090.00

Preference Share Capital0.000.000.000.000.00

Reserves29,019.6425,100.5421,724.4918,142.8212,317.96

Revaluation Reserves0.000.000.0023.2924.59

Networth29,142.7225,223.0221,846.2618,311.6412,459.69

Secured Loans1,234.011,453.341,063.04955.731,102.38

Unsecured Loans6,771.556,813.445,268.545,845.105,453.65

Total Debt8,005.568,266.786,331.586,800.836,556.03

Total Liabilities37,148.2833,489.8028,177.8425,112.4719,015.72



Application Of Funds

Gross Block11,864.7310,455.238,872.717,235.785,575.00

Less: Accum. Depreciation3,559.592,850.252,228.521,727.681,421.39

Net Block8,305.147,604.986,644.195,508.104,153.61

Capital Work in Progress596.84758.68771.34857.661,040.99

Investments16,103.3915,871.9014,684.8213,705.358,263.72

Inventories2,064.181,776.621,577.151,415.375,805.05

Sundry Debtors22,613.0118,729.8412,427.6111,163.7010,055.52

Cash and Bank Balance1,455.661,778.121,729.551,104.89693.13

Total Current Assets26,132.8522,284.5815,734.3113,683.9616,553.70

Loans and Advances21,035.9921,172.8219,275.3412,662.557,198.85

Fixed Deposits0.000.000.00326.9882.16

Total CA, Loans & Advances47,168.8443,457.4035,009.6526,673.4923,834.71

Deffered Credit0.000.000.000.000.00

Current Liabilities32,656.2031,816.0726,687.9819,443.7715,211.04

Provisions2,369.732,387.092,244.182,188.363,066.53

Total CL & Provisions35,025.9334,203.1628,932.1621,632.1318,277.57

Net Current Assets12,142.919,254.246,077.495,041.365,557.14

Miscellaneous Expenses0.000.000.000.000.26

Total Assets37,148.2833,489.8028,177.8425,112.4719,015.72

Contingent Liabilities12,987.9710,309.197,761.661,719.391,371.86

Book Value (Rs)473.57411.87358.81

303.28 212.32

Cash Flow of Larsen and Toubro------------------- in Rs. Cr. -------------------



Net Profit Before Tax6457.096255.335568.565880.673940.41

Net Cash From Operating Activities2114.751081.583833.305482.751478.57

Net Cash (used in)/fromInvesting Activities464.93-1922.28-2409.98-6071.73-3308.53

Net Cash (used in)/from Financing Activities-2990.261015.61-1124.841245.561640.79

Net (decrease)/increase In Cash and Cash Equivalents-410.58174.91298.48656.58-189.17

Opening Cash & Cash Equivalents1905.261730.351431.87775.29964.46

Closing Cash & Cash Equivalents1494.681905.261730.351431.87775.29

Marginal cost sheet of Larsen & Toubro Particulars Rs (In Cr.)Sales Revenue60,873.26

Less Marginal Cost of Sales

Contribution

Less Fixed Cost

Marginal Costing Profit/Loss

Chapter 4Findings, Suggestions and ConclusionFindings Marginal cost is the cost ofthe next unitorone additional unitof volume or output. The marginal cost varies directly with the volume of production and marginal cost per unit remains the same. It consists of prime cost, i.e. cost of direct materials, direct labor and all variable overheads. L & T is diversified company, which operates in national as well as international level. Company is going for new ventures in the market so , we can assume that it has greater scope in future. Earnings per share of the company Rs 56, which shoes the positive trend. Operating income of the company is showing positive trend in the 2011,which shows the positive trend. Net profit of the company is showing the negative slope, which is risky for the company. Long term debt and equity of the company is showing the negative slop, which is good for the company. Fixed assets of the company are showing the decline slop which is alarming situation for the company. Current ratio of the company is showing the giz-gaz trend which is not suitable for the company. Total exports of the company are declining at high rate which is alarming for the company.CONCLUSIONFrom the above information, we can conclude that company is having sound financial position, with reference to debt equity ratio, earning per share, and operating income .But net profit, net export, fixed assets and current ratio is showing negative trend .L&T need to pay attention towards the cost reduction so that profitability of the company can be maintained, and control the liabilities

BIBLIOGRAPHYThe information is obtained from the listed sources www.moneycontrol.com www.wikipedia.com www.timesofindia.com Financial Management- Khan and Jain

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